Correlation Between IShares Trust and ProShares Ultra

Can any of the company-specific risk be diversified away by investing in both IShares Trust and ProShares Ultra at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares Trust and ProShares Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Trust and ProShares Ultra High, you can compare the effects of market volatilities on IShares Trust and ProShares Ultra and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares Trust with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and ProShares Ultra.

Diversification Opportunities for IShares Trust and ProShares Ultra

0.82

Correlation Coefficient

IShares Trust  ProShares Ultra

Very poor diversification

The 3 months correlation between IShares and ProShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and ProShares Ultra High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra High and IShares Trust is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares Trust are associated (or correlated) with ProShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra High has no effect on the direction of IShares Trust i.e., IShares Trust and ProShares Ultra go up and down completely randomly.

Pair Corralation between IShares Trust and ProShares Ultra

Given the investment horizon of 90 days iShares Trust is expected to generate 1.27 times more return on investment than ProShares Ultra. However, IShares Trust is 1.27 times more volatile than ProShares Ultra High. It trades about 0.09 of its potential returns per unit of risk. ProShares Ultra High is currently generating about 0.02 per unit of risk. If you would invest  3,098  in iShares Trust on September 14, 2024 and sell it today you would earn a total of  82.00  from holding iShares Trust or generate 2.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

iShares Trust  vs.  ProShares Ultra High

iShares Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares Ultra High

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra High are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking indicators, ProShares Ultra is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Trust and ProShares Ultra

The main advantage of trading using opposite IShares Trust and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, ProShares Ultra can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ProShares Ultra will offset losses from the drop in ProShares Ultra's long position.

The idea behind iShares Trust and ProShares Ultra High pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.